Global Entrepreneurship Monitor: Right attitude will spark growth

New Zealand is full of entrepreneurs, but too few of them go on to create wealth, writes JOHN DRINNAN.

New Zealand needs a cultural shot in the arm if we are to take full advantage of our strong entrepreneurial spirit.

We fail to transform our entrepreneurial businesses to create enough of our wealth, and Dr Howard Frederick, principal author of a study on New Zealand entrepreneurship, has plenty of ideas why.

As director of the New Zealand Centre for Innovation and Entrepreneurship at Unitec, Frederick ran the 2002 Bartercard New Zealand Global Entrepreneurship Monitor (GEM), part of a study of 37 countries.

When New Zealand joined the GEM network last year we did well.

We scored highly again this year - sixth behind Thailand, India, Chile, Korea and Argentina - with 14 per cent of people aged between 14 and 64 engaged in entrepreneurial activity.

That is 4 per cent more than the United States and much more than Australia, on 8.7 per cent. The average for all 37 countries was just 8 per cent, so we stand out as a country of entrepreneurs.

But we are inclined to become lifestyle entrepreneurs, happy with our comfortable lives rather than expanding our businesses to their full potential.

The typical New Zealand entrepreneur is someone based in Auckland whose main ambition is to have a house, a boat and van with their name on the side, the research shows.

Focusing on lifestyle may be part of our national psyche, but from an economic perspective Frederick suggests lack of ambition combined with a fear of failure could be stopping us from turning our entrepreneurship into wealth and economic growth.

There is another problem: "We are unrelentingly modest," says Frederick.

Individual self-maximisation is a driving force of entrepreneurship, but New Zealanders never trumpet their success.

Americans say 200 per cent of the truth and believe half what they hear. New Zealanders say half the truth. So when an American meets a New Zealander they see a quarter of the reality.

Frederick, an American by birth, came to New Zealand from Germany in 1997.

He says a failed entrepreneur in New Zealand is treated like a pariah. Yet if you fail in business in the United States you will be congratulated for passing Business 101 and be encouraged to start again.

But where do you learn the skills? Our primary schools teach children to be creative and self-reliant, says Frederick, but by secondary school they have lost it and all they want is to get a job and work for a wage.

Despite those cultural concerns, Frederick says we have a culture of innovation and creativity. The so-called No 8 wire innovations are real enough, but we need more and better entrepreneurs to translate them into business and economic success.

While the GEM report rankings are almost identical to last year, our actual level of entrepreneurship dropped from 18 per cent to 14 per cent.

Other countries showed a similar fall, suggesting a retreat from risk-oriented activity after the September 11 terrorist attacks.

In Australia, the number of people involved in entrepreneurial activity halved. Researchers suggested the only big difference between the two countries is much greater Government support this side of the Tasman and more efficient research and development.

New Zealand is said to have about 281,000 opportunity entrepreneurs - people looking for business opportunities - and 55,000 necessity entrepreneurs who had no other choice but to start their own business.

The 127,000 women entrepreneurs accounted for 37.7 per cent of the total and 5 per cent of the female population.

Men significantly outperform women in believing they have the skills to start a business (71 per cent to 55 per cent) but the number of women entrepreneurs outnumber men in the 18-24 age group.

But who are these entrepreneurs? The teenager who spots a market for selling single cigarettes to his schoolmates at a profit meets the description.

The survey found the entrepreneurs by asking respondents: Alone or with others, have you tried to start a business in the past three years? Then have you taken any action, such drawing up as a business plan and paying salaries and wages?

Nine per cent of entrepreneurs are currently unemployed, rising to 25 per cent of Maori entrepreneurs.

Researchers say that entrepreneurs:

* Exude energy, enthusiasm and confidence, and desire independence.

* Spot opportunities and exploit them.

* Take calculated risks and persevere in adversity.

* Make a recognised difference and affect the world around them.

* Are highly communicative individuals with extensive personal networks.

The survey did not reveal how many New Zealand respondents exhibited all these personality traits, but the growing number of academics promoting entrepreneurship have no doubt that they do make a difference.

A study from Europe and North America, quoted in the report, shows there is a positive and statistically robust link between entrepreneurship and economic growth.

For every 4 per cent growth in entrepreneurship we can expect 1 per cent economic growth, says Frederick.

Yet in New Zealand, despite widespread Government programmes for innovation and business start-ups, our high level of entrepreneurship has not translated into creation of wealth and growth.

New Zealanders rank poorly in our ability to measure progress. We have a low sense of urgency and we are lowest in ego - defined as a sense of wanting to make a recognised difference. And the GEM team suggests there are a lot of people with entrepreneurial skills sitting in comfortable jobs in management.

So if companies want to grow and create wealth they may need to put together entrepreneurial teams.

New Zealand does excel in our willingness to support the business activities of our friends and family - angel capital it is called.

The research found that in 75 per cent of New Zealand small business start-ups a family member owned half of the business.

Venture capital investments with start-up entrepreneurs were tiny - an average of $20,000 - but 4.3 per cent of adults had made investments in start-ups during the past three years. This rose to nearly 10 per cent among males aged 45-54.

Academic attention and interest in entrepreneurship has increased with the times, as Governments realise big corporates are not going to deliver growth.

Like New Zealand, most countries are looking to foster small and medium enterprises, preferably export-oriented, to create new wealth. But they need savvy businessmen and women - entrepreneurs - to get them past the start-up phase.

This is the knowledge economy that has galvanised the Government, academia and business in an alliance epitomised by the 16 business incubators that have sprung up in New Zealand in recent years.

Andrew Hamilton is chief executive of the Icehouse, an incubator for 12 fledgling enterprises in Parnell and linked to Auckland University. As with Steve Corbett, who runs the e-centre incubator unit at Massey University's Albany campus, Hamilton says these start-up companies typically combine different personalities.

"In the majority of cases there is this person with the idea, and the entrepreneur - the man or the woman in the white suit, I call them."

There are obvious benefits in linking with mentors and academic staff, but there are also more subtle benefits to be gained from start-ups working alongside one another.

Everybody knows it can be pretty lonely out there starting your own business. Hamilton says entrepreneurs often get caught up in their work and need encouragement to chill out. "I put on a few drinks sometimes just to encourage people to relax. These sort of people get quite intense."

Herald feature:
Global Entrepreneurship Monitor Report - 2002

Unitec: NZ Centre for Innovation & Entrepreneurship